7/17/2019 Dpm

http://slidepdf.com/reader/full/dpm563db90e550346aa9a999207 1/5

Making good strategic choices – Directional PolicyMatrix

The essence of strategy is that it is a choice between two or more good options.

In developing a marketing strategy the choice to be made is of which segments of the market youshould develop tactics to pursue.

The Directional Policy Matrix DPM! is a tool for helping you determine what your preferredsegments are. In completing a DPM you understand what you should invest in and the direction

your organisation should take. The directional policy matrix helps you determine whetherdecisions made in the day"to"day running of the organisation are in it#s best interest.

The Directional Policy Matrix measures the attractiveness of a segment and the capability of theorganisation to support that segment.

 Attractiveness of a Market Segment

$valuating the attractiveness of a segment should include but not be limited to% these variables&

• 'i(e of the segment number of customers% units or ) sales!

• *rowth rate of the segment a very important variable!

• Profit margins of the segment to the sales organisation

• +ngoing purchasing power of the segment

7/17/2019 Dpm

http://slidepdf.com/reader/full/dpm563db90e550346aa9a999207 2/5

• ,ttainable market share given promotional budget% fragmentation of the market and

competitors# promotional expenditures

• -euired market share to break even.

Capability of the organisation

$valuating the capability of the organisation to meet the needs of the segments should include% but not be limited to% these variables analysed against the competition&

• /ompetitive capability of the organisation against the marketing mix product0service%

 place% price and promotion!• ,ccess to distribution channels

• /apital and human resource investment reuired to serve the segment

•

1rand association of the organisation in the eyes of the segment

• /urrent market share0likely future market share.

Scoring the Directional Policy Matrix

To score the DPM you need to know the goal of your marketing strategy. This may be% but notlimited to&

2. Profit lift3. Market share lift

4. 5alue of the organisation if it were for sale.

/omplete scoring the directional policy matrix in four steps&

2. 6eight the relative importance of each factor of attractiveness and capability in terms ofits contribution to the goal of the marketing strategy out of 2.

3. ,llocate the respective weight of a total score of 78 points to each factor. e.g. if theweighting for a factor was 9.3 then the total points available for that factor is 9.3:78;29rounded up!

4. 'core each segment relative to the other segments in how much each segment meets thecriteria of the factor. e.g. <or the attractiveness factor ='i(e of segment#% in the example Table2% score the largest segment 29 and the smallest segment 2.

7. Plot the resultant score in excel and create a bubble chart graph where the si(e of the bubble represents the si(e of the segment for greater visual clarity when it comes tointerpreting the analysis.

7/17/2019 Dpm

http://slidepdf.com/reader/full/dpm563db90e550346aa9a999207 3/5

1elow is an example chart for an organisation selling services.

7/17/2019 Dpm

http://slidepdf.com/reader/full/dpm563db90e550346aa9a999207 4/5

Interpreting the Directional Policy Matrix

The directional policy matrix suggests tactics for each of nine sectors% as shown in the figure below.

7/17/2019 Dpm

http://slidepdf.com/reader/full/dpm563db90e550346aa9a999207 5/5

The tactics for each sector descriptor are&

2. >eader – <ocus your resources on segments in this sector.

3. *rowth leader – *row by focusing ?ust enough resources here.

4. /ash *enerator – Milk segments in this sector for expansion elsewhere.

7. Phased withdrawal – Move cash to segments with greater potential.

@. /ustodial – Do not commit any more resources to segments in this sector.

A. Try harder –Determine if there are ways in which you can build your capability forsegments in this sector for low levels of cash.

B. Double or uit – Invest in your capability or get out of segments in this sector.

8. Divest – >iuidate or move assets used in segments in this sector as fast as you can.